Market technician Dave Chojnacki of Street One Financial recaps Tuesday’s big equities rally, which was driven by Washington’s tax reform progress, and updates the important technical levels to watch for the major U.S. averages as November nears its close.
Decent economic reports pushed Equities to a positive start on Tuesday. The major indices became stronger during the session as the new FED chair, Jerome Powell, at his confirmation hearing, gave a relaxed look toward regulations. Later, the passing of the Tax Bill through the Budget Committee sent stocks and the Financial sector off to the races.
The Dow Jones Industrial Average (DJIA) and S&P 500 (SPX) had a strong day, closing near their highs of the day and at new record highs. The Nasdaq 100 (NDX), was the weakest of the big three, as Techs lagged, but it too eked out a gain to new highs.
At the close, the DJIA was up 1%, the SPX gained 0.98%, and the NDX added 0.26%. Breadth was decidedly positive, 2 to 1, on above average volume. ROC(10)’s advanced for all three major indices, as they remained in positive territory. RSI’s moved higher, with the SPX now the strongest at 72.1. The DJIA is now at 71.2 and the NDX at 71.6. All three indices are moving into overbought territory.
The SPX had its MACD cross above signal, joining the NDX. The DJIA is the only index of the big three with its MACD below signal. The ARMS index ended extremely bullish at 0.60. The three major indices moved to new record highs on Tuesday and were joined by IWM (Russell 2000), making it a broad rally.
The DJIA and SPX closed above their upper Bollinger Band®s of 23722 and 2613, respectively. The DJIA closed at 23836, moving further from its 20D-SMA at 23494. The NDX closed at 6422 and traded as high as 6426 in the session. It remains above its 20D-SMA of 6323 and just below its upper Bollinger Band® of 6430.
The SPX closed at its high of the day, 2627. Its MACD crossing positive is a strong near term signal. The VIX diverged and added 1.6%, to finish at 10.03.
Near term support for the NDX is at 6400 and 6375. Near term resistance is at 6425, 6430 and 6450. Near term support for the SPX is at 2625 and 2612. Near term resistance is at 2637 and 2650.
Europe is mixed in early trade Wednesday, while U.S. Futures are pointing higher in the premarket. Economic reports on tap for today include GDP at 8:30am, Pending Home Sales at 10:00am, EIA Petro Report at 10:30am, and Fed Beige Book at 2:00pm.
The SPDR Dow Jones Industrial Average (SI:SPDR) was unchanged in premarket trading Wednesday. Year-to-date, DIA has gained 22.48%, versus a 18.69% rise in the benchmark S&P 500 index during the same period.
DIA currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #4 of 80 ETFs in the Large Cap Value ETFs category.